Energy stocks are under pressure amid growing recession fears triggered by the Trump administration’s reciprocal tariffs. OPEC+’s decision to accelerate oil production adds to the pressure, further dampening investor confidence.
Despite these headwinds, the recent pullback in energy stocks presents a compelling opportunity for long-term investors. Buying the dip in fundamentally strong energy stocks could translate into attractive income and meaningful capital gains over time.
So, if you plan to put $15,000 in leading Canadian stocks in the energy sector for income and appreciation, here are my top picks.
Energy stock #1
Investors looking for top energy stocks for growth and income could consider Canadian Natural Resources (TSX:CNQ). Shares of this oil and gas producer have dropped 14.5% in the last five trading days, reflecting recession concerns and its impact on energy demand and commodity prices. Nonetheless, CNQ’s fundamentals remain solid, supported by its diversified, high-quality assets.
Canadian Natural Resources’ production mix is spread across a range of commodities and oil types, offering operational flexibility and stability even in fluctuating commodity prices. Much of its liquid production comes from long-life, low-decline assets, including high-value synthetic crude operations with zero decline. These assets help the company maintain consistent cash flow while keeping its reserve replacement costs low.
Thanks to its ability to generate solid cash flows, the Canadian energy giant has raised its annual distributions at a compound annual growth rate (CAGR) of 21% for 25 consecutive years. In addition, CNQ stock offers a healthy yield of 5.9%. Besides steady income, CNQ stock has delivered stellar capital gains of over 415% in the last five years.
Looking ahead, its high-quality portfolio, acquisitions of the Athabasca Oil Sands Project and Duvernay assets, significant inventory of low-capital projects, and strong balance sheet position it well to deliver solid financials. This will enable it to reward investors through consistent dividend growth and deliver significant capital gains.
Energy stock #2
Enbridge (TSX:ENB) is a no-brainer energy stock for income and steady capital gains. Like all stocks, this integrated energy infrastructure company recently witnessed a pullback. However, its long-term fundamentals remain solid. Thanks to its diversified asset portfolio, high system utilization, and minimal exposure to commodity price fluctuations, it consistently delivers steady earnings and higher cash flows.
Also, with steady cash flows from long-term contracts, the company can consistently pay higher dividends in all market conditions.
Thanks to its resilient earnings and distributable cash flow (DCF), Enbridge has raised its dividend for 30 straight years and is well-positioned to continue growing it over time. Currently, ENB stock offers an attractive dividend yield of 6.3%.
Enbridge’s contractual arrangements, focus on optimizing its operations, and low-cost expansion opportunities position it well to deliver solid DCF per share, driving future dividend payouts and share prices over the long term. Moreover, its investments in traditional and renewable energy projects will enable Enbridge to benefit from growing energy demand.
Energy stock #3
Another top energy stock to consider is Brookfield Renewable Partners (TSX:BEP.UN), which is poised to gain from higher demand and adoption of green energy. The company benefits from its diversified renewable energy assets and highly contracted portfolio, which add stability and drive its financials and dividend payouts.
It is worth noting that Brookfield has raised dividends by at least 5% in the last 14 consecutive years. Moreover, the stock currently offers a high yield of 7.4%, making it a compelling income stock for investors.
With its extensive installed capacity and a significant development pipeline, Brookfield is well-positioned to capture the growing demand for renewable energy and deliver consistent fund flows. This will enable it to enhance shareholder value through increased dividend payments. Further, Brookfield’s focus on asset monetization and high-potential opportunities augur well for growth.
